How might I monitor a fiduciary manager?

Fiduciary Management for UK Pension Schemes

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The question of monitoring is best addressed before the fiduciary manager is appointed. It should be considered as part of a proper and effective selection exercise. In this way, there is clarity and agreement over the measurement, benchmarking and reporting that will be required from inception.

Clients are delegating more than ever to an external partner. Despite the trust that must exist between fiduciary manager and client, just like a fund manager, these firms should be monitored. Indeed, with schemes delegating more of the decision-making regarding investment return and risk, a monitoring mechanism becomes very important indeed. This should not be restricted only to financial monitoring but also extend to operational risk covering everything from back office functions and support staff, through to IT systems.

The actual form of monitoring tends to be client specific. Some clients only require annual assessments of the fiduciary manager and attendance at investment sub-committee meetings, whilst others might seek verification of a variety of risk and return information.

And finally, the calculation of any performance fee can be complex, so independent monitoring of the amount payable is advisable.